War has become an increasingly common theme in the news.
Ukraine has been at war with Russia for almost two years. Israel is fighting in Gaza, though we have concerns that war could spread to Lebanon or Syria. That war has already affected shipping in the Red Sea. The U.S. has responded by attacking Iranian-backed Houthi rebels in Yemen.
You might have missed some other stories that are important. In the past few weeks, we learned:
- The German military is preparing for a war in Europe. The plan assumes that Russia will launch cyberattacks against former satellite states Estonia, Lithuania and Latvia. These could serve as false flag operations for military operations that would spread throughout Europe.
- Pakistan and Iran are launching attacks on each other’s territories. The purpose is to deter militants, but these type of conflicts can be unpredictable.
- Taiwan elected a nationalist president while concerns about U.S. support increased.
- North Korean rhetoric is growing more hostile at the same time war planning seems to be increasing.
- Egypt is supporting Somalia in tensions with Ethiopia over access to seaports.
There are other global hotspots, but you get the idea … the world is a dangerous place.
So when we read news like this as investors, it’s logical to ask: What about gold?
A Hedge Against War & Inflation
Gold has been a hedge against war for thousands of years. It’s also an inflation hedge. And inflation might not be dead yet. Those Houthi missiles are raising shipping costs and threatening supply chain reliability.
In addition to these factors, artificial intelligence adds to the bullish case for gold. Only a small amount of gold is used in computer chips, but the demand for chips is growing.
This comes at a time when gold supply and demand are relatively balanced — a fundamental factor many investors might be missing.
This leads us to a simple conclusion from all this news…
A Bullish Case for Gold (& GDX)
The current global situation could lead to a rally in gold. Prices are up more than 13% since Israel was attacked, and gold has been above $2,000 an ounce since November.
Gold prices have also softened in the past few weeks. That’s consistent with seasonal trends. As a commodity, gold tends to closely follow seasonal trends.
The same is true for gold miners. The seasonal trend for VanEck Gold Miners ETF (NYSE: GDX) is shown as the blue line in the chart below.
As you can see, seasonals are turning bullish for miners. Shares of mining companies tend to closely track trends in gold prices. Miners are usually more volatile. That makes them an aggressive alternative to owning gold.
With so many factors pointing to higher gold prices, investing in GDX or individual miners could be an attractive choice for investors looking to hedge global risks right now.
Editor, Precision Profits
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